Forex Market Overview

Forex Market Overview 29 July 2008

The Usd was constricted to a tight range in the Asian session, as a lack of new data kept traders on the sideline. The EurUsd traded between 1.5737 – 1.5754, while the UsdJpy trended slightly lower from 107.60 to 107.30, on a string of stronger figures. The Jpy fueled carry trades were unchanged, with the king of carry,the TryJpy, trading around 88.950. Oil followed gold slightly higher to $124.98bll & $931.50oz. The US stock markets were sharply lower ( as financial shares led the DJIA and S&P -2.11% and -1.85% respectively), pushing down Asian indexes and European futures. The FDIC's seizure of two smaller failed banks, over the weekend weighed on sentiment and cast cloud over the health of the US's consumer banking sector. Quietly, the VIX has crept back up to 24.23, but FX 1 month implied vols are steadily easing. Oil prices seem to be the critical driver in Usd pricing, ahead of the late week's data releases.

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In Japan, the economic data came out stronger than expected. Retail Sales for June printed at 0.0% vs. -0.5% exp m/m (0.3% vs. -0.2% exp y/y). Household Survey was also stronger than the expectations, but the outlook is gloomy: Household Survey shows that real spending in June fell -1.8% vs. -2.8% exp. However, the number of respondents (in the Cabinet office survey), which indicated that they would cut back on dining out and entertaining spending, significantly exceed those who were looking to increase spending. BoJ's Nishimura spoke with the media and said that the BoJ's policy was 'wide open' between increasing upside inflation and downside growth risks.

In New Zealand, Building permits for June fell less than expected to -20.1 vs. -42.3% prior reading. While the NzdUsd received a slight boost on the release trading up to 0.7457, we don't expect the gains to hold.

Market will be watching a string of UK data in European session. The CBI Distributive Trades Survey has stabilized in the past couple of months, but it still highlights weak demand. Spending on summer clearance sales are reported to have been strong, but with consumers coming under pressure from rising inflation, the threat of unemployment and the fall of housing prices, we don't expect spending to stay buoyant. The number of mortgage approvals for new house purchase fell below their early 1990s lows in May and are expected to fall further in June. Supported by the British Bankers Association, figures already released are showing a fall last week. While the weak fundamental data will be tempered by inflation concerns, we are expecting some weakness in Gbp today on the negative data.

German regional CPI numbers will released throughout the day, along with the final national figure. With consensus at 3.1% we expect headline CPI to surprise to the upside.

Daily Forex Pivot Points
AUDUSD
R 3: 0.9794
R 2: 0.9675
R 1: 0.9637
CURRENT: 0.9580
S 1: 0.9527
S 2: 0.9477
S 3: 0.9451

EURJPY
R 3: 171.81
R 2: 171.07
R 1: 169.97
CURRENT: 169.41
S 1: 167.50
S 2: 166.01
S 3: 165.33

USDSGD
R 3: 1.3826
R 2: 1.3717
R 1: 1.3661
CURRENT: 1.3626
S 1: 1.3567
S 2: 1.3501
S 3: 1.3448

Forex Market Overview

Forex Market Overview 25 July 2008

The Usd was slightly weaker in Asian session, as sell off in the equity markets and higher oil price put pressure on the greenback. The EurUsd traded in a 1.5640 – 1.5750 range while the UsdJpy traded from 107.98 down to 107.40. US economic data came in worse than expected, sending yields lower, S&P -2.3% and halting the growing sense of optimism surrounding the US. In addition, deterioration in the Eurozone, lead by a decline in the German IFO, increased speculation that the ECB has room to raise rate in the coming month. Crude prices rose to $124.75bll.

In Japan, CPI was broadly inline with expectations. Nationwide CPI increased by 2.0% vs. 1.9% exp and core rose by 0.1% vs. 0.0% y/y exp. While the rise on inflation will catch the BoJ attention, BoJ’s Mizuno warned yesterday that the government might say that Japan is in a recession and that the BoJ is more concerned with risk to growth than inflation.

In the UK, provisional estimate of GDP q2 will capture the market’s attention. We expect that the UK economy has come to a stand still and possible ground to a halt. With dismal reports for the critical services sector and recent drop in retail sales, the risk is to the downside. We should see continued selling pressure on the Gbp.

Daily Forex Pivot Points
AUDUSD
R 3: 0.9818
R 2: 0.9794
R 1: 0.9738
CURRENT: 0.9577
S 1: 0.9597
S 2: 0.9565
S 3: 0.9477

EURJPY
R 3: 171.81
R 2: 171.07
R 1: 169.97
CURRENT: 167.67
S 1: 168.25
S 2: 166.01
S 3: 165.33

USDSGD
R 3: 1.3826
R 2: 1.3717
R 1: 1.3661
CURRENT: 1.3591
S 1: 1.3452
S 2: 1.3399
S 3: 1.3300

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Forex Market Overview

Forex Market Overview 23 July 2008

The Usd consolidated gains in the Asian session as hawkish comments from US officials and oil falling sharply helped boost the Usd. The EurUsd stayed in a tight range from 1.5775 to 1.5798, while the UsdJpy saw choppy trading between 107.16 to 107.38. The NzdUsd slipped to 0.7750, as traders speculate on an earlier than expected rate cut. The AudUsd also lost ground, despite the higher then expected inflation reading. The US equity market shrugged off poor earnings to close up and Asian equities are following. Commodities still are soft with gold down -1.65% to 945.68oz and wti crude at 127.74, as the declining global growth story gains traction and damped demand of inflation hedges.

It was Fed’s Plosser ultra hawkish comment that added momentum to the Usd buying frenzy yesterday (part of a recent trend of hawkish comments from Fisher, Hoenig, Stern & Lacker but divergent from Bernanke’s stated views). Stating "We will need to reverse course - the exact timing depends on how the economy evolves, but I anticipate the reversal will need to be started sooner rather than later. And I believe it will likely need to begin before either the labor market or the financial markets have completely turned around." The comment “before either the labor market or financial market has completely turned around” was unprecedented, since the Fed has never raised rates while payrolls shown a negative trend. As we stated yesterday in our Asian session, we had expected rhetoric from policy makers to affect FX sentiment in the ultra short term and expect the aggressive Usd buying to reverse intraday.

Australian CPI released today rose quicker than the market had expected by 1.5% q/q vs. 1.2% exp (lifting y/y to 4.5% vs. 4.2% exp). However, the RBA preferred measure rose by q2 1.2% q/q, which was unchanged from previous reading. We expect the RBA to be on hold for the remainder of the year, as moderating growth should help ease inflationary pressures.

The highlight of the European session will be the UK MPC minutes for July. There are mounting signs that the MPC might have slightly shifted towards a growth focus. June’s minutes showed that members had discussed further tightening and, since then, all measures of inflation have increased (ppi, cpi and inflation expectations). However, much of this deterioration was expected. What has been unexpected was the rate of moderation in the real economy and the genuine risk the UK might slip into a recession. We expect Blanchflower to have voted for a cut (as always), but the market might get a surprise from Kate Barker, a good proxy for general sentiment. With the Gbp trading at 1.9900 on yield differentials, any real or perceived shift could lead to a considerable sell-off.

14.00gmt - Fed's Mishkin speaks
16.15gmt - Fed's Kohn speaks

Daily Forex Pivot Points
AUDUSD
R 3: 0.9895
R 2: 0.9850
R 1: 0.9818
CURRENT: 0.9673
S 1: 0.9675
S 2: 0.9665
S 3: 0.9597

EURJPY
R 3: 171.07
R 2: 170.00
R 1: 169.92
CURRENT: 169.78
S 1: 168.25
S 2: 166.00
S 3: 165.33

USDSGD
R 3: 1.3717
R 2: 1.3660
R 1: 1.3597
CURRENT: 1.3606
S 1: 1.3452
S 2: 1.3395
S 3: 1.3300

The ForexGen's provided services are all restricted and regulated by the international banking and financial regulatory standards. All our provided activities are supported by creativeness and modernization. Ambitious & motivated employees are working simultaneously to protect the customer's confidentiality. ForexGen is continuously providing the market's most competitive conditions.

ForexGen complies with the trade commissions in the USA, EU and Australia. Being registered by the commercial authorities in 18+ countries, we adhere to the United Nations Commission on International Trade Law (UNCITRAL).

Profile regulatory information:

ForexGen is complying with all applicable international laws and all financial regulations and procedures governing its industry in order to sustain the security standards in the financial services world.

Forex Market Overview

Forex Market Overview 21 July 2008

Usd was stable in Asian session as the lack of new data and non-data events gave speculators nothing new to trade on. EurUsd stayed well within Fridays range, trading from 1.5830 – 1.5874 while UsdJpy trended slightly lower from 106.98 to 106.71. AudUsd broke out of Fridays doldrums, trading back up to 0.9767. Asian Equity markets are in the green while European index futures are pointing to a negative open. Commodities are higher with wti crude trading at $129.88bbl and gold up .66% to 961.37. Bonds continue to decline across the treasury curve, as risk appetite is slowly returning to the market. FX 1-month implied vols are coming off last weeks highs, helping to support renewed risk appetite.

In the UK Rightmove House Price indices showed another decline in prices m/m 1.8% ( y/y 2.0%). In addition, the report also warned that unsold homes (per agency) have hit a record high. While the market was silent to the news, with deteriorating domestic conditions and the housing correction still well entrenched, the BoE will be increasingly pushed into a difficult dilemma (especially considering the UK will skid dangerously close to a recession).

In Australia , PPI came in lower for q2 rising to 1.0% q/q well below the expected 1.6% q/q, however the data does show an acceleration of inflation pressures. While PPI is not directly correlated with CPI it illustrates that inflation is still a concern and gave the Aud a slight boost in early trading.

No major events or data scheduled for release in the UK or Eurozone.

Daily Forex Pivot Points
AUDUSD
R 3: 0.9895
R 2: 0.9849
R 1: 0.9818
CURRENT: 0.9755
S 1: 0.9675
S 2: 0.9664
S 3: 0.9597

EURJPY
R 3: 170.00
R 2: 169.67
R 1: 169.18
CURRENT: 169.17
S 1: 168.25
S 2: 166.01
S 3: 165.33


USDSGD
R 3: 1.3717
R 2: 1.3661
R 1: 1.3565
CURRENT: 1.3511
S 1: 1.3452
S 2: 1.3399
S 3: 1.3300

The ForexGen's provided services are all restricted and regulated by the international banking and financial regulatory standards. All our provided activities are supported by creativeness and modernization. Ambitious & motivated employees are working simultaneously to protect the customer's confidentiality. ForexGen is continuously providing the market's most competitive conditions.

ForexGen complies with the trade commissions in the USA, EU and Australia. Being registered by the commercial authorities in 18+ countries, we adhere to the United Nations Commission on International Trade Law (UNCITRAL).

Profile regulatory information:

ForexGen is complying with all applicable international laws and all financial regulations and procedures governing its industry in order to sustain the security standards in the financial services world.

The Forex Market Overview

The Forex Market Overview 15 July 2008

The Usd was broadly weaker in Asian sessions causing traders to brace themselves for a data heavy day as risk aversion moved back into the market. EurUsd after a short retreat, trended upwards from 1.5882 to 1.5954 while AudUsd broke easily thru 0.9737 intraday resistance heading to 0.9772 new highs. UsdJpy slipped to 105.70 as concerns over credit market losses damped risk appetite. As expected, Jpy funded carry trades were also sold off. Worries in credit markets are currently weighing on equity markets with Shanghai’s down 3.43% and DAX falling 1.77% at the open (US futures are lower across the board). Precious metals continue to surge forward with gold trading to 973.78 and silver 19.13. And given the current state of uncertainty VIX has climbed to 28.48 and 1month implied Vols have followed.

In a unanimous vote the BoJ held rates at 0.50% as expected. In addition, their half year update revised growth downwards while raising the CPI forecast. Perhaps the key take away, was the unique wording surrounding inflation which stated "in the case that downside risk to the economy eases, risks to higher fluctuations in the economy and prices may be intensified due to prolonged easy monetary conditions". This hints that the BoJ is concerned that its loose monetary policy might actually be aiding to inflation and that they therefore, are willing to tighten should CPI move above their comfort zone. We expect that this comment will only benefit Jpy in the short term as markets are still trading on yield differentials and risk appetite.

In New Zealand inflation moves higher than expected, with food and energy by far the largest contributors. Headline inflation printed strong at q/q 1.6% vs. 1.4% exp, y/y 4.0% vs. 3.8% exp. Given these elevated figures it would be difficult for the RBNZ to rationalize a rate cut in July and even puts Sept cuts in jeopardy.

In Australia the RBA minutes released today were mildly dovish. The Key takeaway for the minutes were "weighing up the various factors, the Board judged that the current stance of monetary policy remained appropriate". The RBA recognized that the economy was clearly weakening stating "Consumer spending had slowed significantly and there had been a marked decline in the growth of credit to both households and businesses. Surveys indicated that confidence had fallen further over the past month and asset prices were weakening".

In the UK markets, we will be watching CPI data which is likely to rise from 3.3% to 3.6% y/y and give the Gbp some support. In addition with signs of acceleration in June PPI the BoE will be gauging second round effects into core. In our view with inflation far from peaking, the MPC should be on hold for the next few months at least.

On the continent, German ZEW will have trades attention. We are expecting another decline to -56.0 from -52.6…getting precariously close to all time recession lows of -62.0. While this index is not very accurate in regards to predicating GDP we don’t expect the market to look kindly on the gloomy data.
14.00gmt - Fed’s Bernanke Testifies to Senate on Economy

Daily Forex Pivot Points
AUDUSD
R 3: 0.9923
R 2: 0.9792
R 1: 0.9758
CURRENT: 0.9788
S 1: 0.9664
S 2: 0.9597
S 3: 0.9546

EURJPY
R 3: 171.88
R 2: 170.00
R 1: 169.67
CURRENT: 168.52
S 1: 167.83
S 2: 167.13
S 3: 166.09

USDSGD
R 3: 1.3850
R 2: 1.3827
R 1: 1.3729
CURRENT: 1.3480
S 1: 1.3476
S 2: 1.3470
S 3: 1.3400

The ForexGen's provided services are all restricted and regulated by the international banking and financial regulatory standards. All our provided activities are supported by creativeness and modernization. Ambitious & motivated employees are working simultaneously to protect the customer's confidentiality. ForexGen is continuously providing the market's most competitive conditions.

ForexGen complies with the trade commissions in the USA, EU and Australia. Being registered by the commercial authorities in 18+ countries, we adhere to the United Nations Commission on International Trade Law (UNCITRAL).

Profile regulatory information:

ForexGen is complying with all applicable international laws and all financial regulations and procedures governing its industry in order to sustain the security standards in the financial services world.